Vedanta Resources Ltd. (VRL) was downgraded to Caa1 from B3 and its senior unsecured ratings to Caa2 from Caa1. Moody’s cited “increasing refinancing risk surrounding holding company VRL’s large debt maturities” as the primary reason for the rating action. They added that delays in its refinancing efforts and its continued reliance on dividend receipts are depleting liquidity at its operating subsidiaries. Moody’s notes that while VRL has paid down ~$2bn of its debt during fiscal 2023, maintaining liquidity and proactive liability management are more important for preserving credit quality, as opposed to debt reduction. It estimates VRL’s gross debt/EBITDA to remain around 4x, below the previous downgrade trigger of 5.5x. Its diminishing cash reserves and thereby depleting liquidity may hurt its subsidiaries’ ability to raise funds. They added that Vedanta is exposed to “material refinancing risks” that can “exacerbate the likelihood of a payment default or a distressed exchange”.

Vedanta’s dollar bonds were mixed – its 7.125% bonds due May traded 0.6 points lower to 94.67 while its 13.875% 2024s traded 0.3 points higher to 87.

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